Venture capital market in India comes of age
The surest sign that a venture capital market is maturing, or at least is on its way there, is when new funds and fund managers start up right in the midst of a correction
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The surest sign that a venture capital market is maturing, or at least is on its way there, is when new funds and fund managers start up right in the midst of a correction. Over the past 6-8 months, more than a dozen new venture capital firms have sprouted across India’s start-up market, even as investment levels across stages, from early to growth, have declined with alarming consistency. Mint reported on 29 July that first-time fund managers in India, both in venture capital and private equity, are on the road to raise as much as $2 billion as limited partner interest in this market remains strong.
Let’s take a look at five interesting new venture capital firms that have slightly varying mandates but the same goal—discovering the next generation of high growth start-ups in India.
Pravega Ventures: Founded by Mukul Singhal and Rohit Jain, who quit Gurgaon-based private equity firm SAIF Partners in January. The two used to lead seed investments for SAIF. Pravega’s $30 million debut fund will take that mandate forward. Start-ups at the business plan stage or the minimum viable product stage can expect a first cheque of under $1 million from the fund. Singhal, when I last spoke with him a couple of months ago, said that India’s venture capital market is ready for specialist seed funds, the bridge between angel funding and Series A capital. Such funds are not new in India but have had an uneven ride in the past, especially in the last two years when they found themselves edged out of the market because of the aggressive seed investment programmes launched by Series A stage investors. Singhal, who has also been a prolific angel investor in the past, and Jain are deeply embedded in both the start-up and venture capital communities and Pravega will be among the more interesting emerging venture capital shops to watch over the next few years.
IAN Fund: The country’s largest angel investor network, Indian Angel Network (IAN), is raising a Rs.150 crore (about $22.4 million) early stage fund, Mint reported this week. The fund, registered as IAN Fund I with the Securities and Exchange Board of India (Sebi), will co-invest with the angel network. Talk of a fund has been around for nearly three years ever since Sebi notified a framework for regulating angel networks under the sub-category ‘Angel Funds’ under Category I Venture Capital Funds. IAN has about 400 members in its network and has made 17 investments already this year. Angel networks such as IAN have been under some pressure lately because of the emergence of angel funding platforms such as LetsVenture and ‘superangels’ such as Ratan Tata, Rajan Anandan and T.V. Mohandas Pai who command some of the best quality of deal flow in the market at this stage.
Stellaris Venture Partners: This one comes from the Helion Venture Partners breakaway team—Rahul Chowdhri, Alok Goyal and Ritesh Banglani . They’re raising a $100 million debut early stage fund and are currently in talks with software services firm Infosys Ltd to garner about $15 million, The Economic Times reported recently. The team comes with experience in investing in the technology sector, particularly in consumer Internet businesses, and plans to continue doing that with the new fund. A $100 million target corpus is a tough ask for a first-time fund manager team in the current venture capital market environment. Global limited partners, who bankroll more than 80% of India’s venture capital industry, are concerned about the industry’s poor track record on returns. Stellaris plans to invest primarily at the Series A stage, which is currently undergoing a crunch and desperately needs new benefactors.
Pi Ventures: Manish Singhal, co-founder of LetsVenture, the popular angel dealmaking platform from Bengaluru, is getting into the venture capital business with Pi Ventures. Singhal quit LetsVenture in late 2014 barely a year after its launch and has since been keeping himself busy with angel investments. According to Pi Ventures’ website, Singhal’s co-founder is technology entrepreneur and angel investor Umakant Soni. Details aren’t available yet on the size of the fund it is raising but Pi will invest in areas such as artificial intelligence, machine learning and IoT (Internet of things). What’s most interesting about the firm is the group of advisors it has put together. The list includes Info Edge founder Sanjeev Bikhchandani, iSpirit co-founder Sharad Sharma and SlideShare co-founder Amit Ranjan.
UC-RNT Fund: RNT Associates and the University of California have teamed up to raise a $100-150 million venture capital fund, Mint reported last week. RNT Associates is Tata Sons chairman emeritus Ratan Tata’s investment firm. Meeting its target corpus will be far from a battle for this fund. It is expected to invest anywhere between $5 million and $15 million and will probably play across early- and somewhat later-stage start-ups. Still, Tata’s plunge into venture capital business will go a long way in validating the potential of India’s start-up market, something it is crying out for at the moment.
Snigdha Sengupta is a consulting writer with Mint. She contributes stories on venture capital and private equity.